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Bond Market Insights - Wed, 21 Sept 2022

Current market trends continued yesterday. Fosun was off 3pts, with selling from real money and private banks. China property was mixed with high beta names down 1pt and Roadking, Shuion and KWG up, being favoured by retail. Sunac and Guangzhou R&F were soft

China’s 26th ranked builder China SCE is in focus. Fitch downgraded it to B- from B+, negative outlook, citing pressure on cash generation and on the liquidity buffer. REDD reported last night that China SCE Group to issue state-guaranteed interbank notes. USD denominated bonds are up 7pts on the back of this, CHINSC 7.25% 23 trading around $40.

Following yesterday’s story of the international consortium looking to access Kaisa’s tier 1 bank portfolio, Singapore’s UOB has offered to buy out all portions of a loan facility that backs a Hong Kong based luxury residential project, to which it is already a lender. Taking on the whole HK$10bn loan would give it full claim over the project.

China financials were firm. Leasing, non-banks and bank T2’s were 1-3bps tighter on customer demand and limited supply. Late morning news broke of S&P downgrading the four major state-owned bad-debt managers, saying the country’s economic slowdown and property-sector slump have made operating conditions more challenging, but looks more to be that politics rather profit is becoming the motivating factor.

Great Wall was lowered by two notches to BBB while China Huarong Asset Management Co., China Orient Asset Management Co. and China Cinda Asset Management Co. were all cut by one step to BBB-, BBB and BBB+ respectively, outlook stable.

The ratio of global central bank hikes to cuts has reached as high as 25:1 recently, after not being above 5:1 at any point in the past 25 years. Sweden’s Riksbank hiked by 100bps, against consensus of 0.75. But the published rate path implies a dialing back with a follow-up 50bp hike in November and a 25bp in February, taking rates to a peak of 2.5% next year. (Sweden in US$ basket/SDR?)

Canadian inflation was diverse. It fell 0.3% MoM through August, faster than expected largely due to gasoline prices which fell -9.6% m/m. However, as food prices increased 0.8% m/m, food purchased from stores rose 10.8% y/y, at the fastest pace since Aug 1981.

King Canute is back in. Defying the tides of ballooning rates as the BOJ announced an unscheduled JGB purchase operation as it seeks to cap upward pressure on yields before a policy decision later this week, buying bonds out to 25 year maturities.


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